Healthcare 2015 win win or lose lose IBM consulting report


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A portrait and a path to successful transformation - A global perspective

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Healthcare 2015 win win or lose lose IBM consulting report

  1. 1. Healthcare 2015: Win-win or lose-lose? IBM Global Business Services Healthcare A portrait and a path to successful transformation IBM Institute for Business Value
  2. 2. IBM Institute for Business Value IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues. This executive brief is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to for more information.
  3. 3. Healthcare 2015: Win-win or lose-lose? Healthcare 2015: Win-win or lose-lose? A portrait and a path to successful transformation Executive Summary Healthcare is in crisis. While this is not news for many countries, we believe what is now different is that the current paths of many healthcare systems around the world will become unsustainable by 2015. This may seem a contrarian conclusion, given the efforts of competent and dedicated healthcare professionals and the promise of genomics, regenerative medicine, and information-based medicine. Yet, it is also true that costs are rising rapidly; quality is poor or inconsistent; and access or choice in many countries is inadequate. These problems, combined with the emergence of a fundamentally new environment driven by the dictates of globalization, consumerism, demographic shifts, the increased burden of disease, and expensive new technologies and treatments are expected to force fundamental change on healthcare within the coming decade. Healthcare systems that fail to address this new environment will likely “hit the wall” and require immediate and major forced restructuring – a “lose-lose” scenario for all stakeholders. The United States spends 22 percent more than second-ranked Luxembourg, 49 percent more than third-ranked Switzerland on healthcare per capita, and 2.4 times the average of the other OECD countries. 1 Yet, the World Health Organization ranks it 37th in overall health system performance. 2 In Ontario, Canada’s most populous province, healthcare will account for 50 percent of governmental spending by 2011, two-thirds by 2017, and 100 percent by 2026. 3 In China, 39 percent of the rural population and 36 percent of urban population cannot afford professional medical treatment despite the success of the country’s economic and social reforms over the past 25 years. 4 Change must be made; the choices left to the stake- holders of today’s healthcare systems are when and how. If they wait too long to act or do not act decisively enough, their systems could “hit the wall” – in other words, be unable to continue on the current path – and then, require immediate and major forced restructuring. This is a frightening, but very real prospect. Financial constraints, counterproductive societal expectations and norms, the lack of alignment in incentives, short-term thinking, and the inability to access and share critical information all inhibit the willingness and ability of health- care systems to change. If the willingness and ability to change cannot be mustered, we believe the result will be lose-lose transformation, a scenario in which the situa- tion for virtually all stakeholders in the healthcare system deteriorates. Fortunately, there is a more positive scenario, but it is one that will require new levels of accountability, tough decisions, and collaborative hard work on the part of all stakeholders. Specifically, we strongly recommend: Healthcare providers expand their current focus on episodic, acute care to encompass the enhanced management of chronic diseases and the life-long prediction and prevention of illness. Consumers assume personal responsibility for their health and for maximizing the value they receive from a transformed healthcare system. Payers and health plans help consumers remain healthy and get more value from the healthcare system and assist care delivery organizations and clinicians in delivering higher value healthcare. Suppliers work collaboratively with care delivery organi- zations, clinicians, and patients to produce products that improve outcomes or provide equivalent outcomes at lower costs. i
  4. 4. IBM Global Business Services Win-Win Transformation Tra nsforming Transforming Transform ing Value ConsumerResponsi bility CareDeliv ery Source: IBM Institute for Business Value. Societies make realistic, rational decisions regarding life- style expectations, acceptable behaviors, and how much healthcare will be a societal right versus a market service. Governments address the unsustainability of the current system by providing the leadership and political will power needed to remove obstacles, encourage innova- tion, and guide their nations to sustainable solutions. If stakeholders can act with accountability and demon- strate the willingness and ability to change, they can better harness the drivers of change and achieve a win-win transformation. These healthcare systems will become national assets rather than liabilities. They can help the citizens they serve lead healthier, more productive lives, and their countries and companies compete globally. They will also help these countries win a competitive advantage in the emerging global healthcare industry. Transforming into the era of action and accountability Action and accountability are the basic ingredients of change. To successfully transform their healthcare systems, we believe countries will undertake the following actions: • Focus on value – Consumers, providers, and payers will agree upon the definition and measures of health- care value and then, direct healthcare purchasing, the delivery of healthcare services, and reimbursement accordingly. • Develop better consumers – Consumers will make sound lifestyle choices and become astute purchasers of healthcare services. • Create better options for promoting health and providing care – Consumers, payers, and providers will seek out more convenient, effective, and efficient means, channels, and settings for health promotion and care delivery. A clear accountability framework empowers these actions. Accountability must span the system with governments providing adequate healthcare financing and rational policy, healthcare professionals adhering to clinical standards and delivering quality care, payers incentivizing preventive and proactive chronic care, and citizens taking responsibility for their own health. The value transformation Value is in the eye of the purchaser, but today value in healthcare is difficult to see. Data regarding the health- care prices is tightly held and difficult, if not impossible, to access or comprehend; quality data is scarcer still and mostly anecdotal or incomprehensible. To complicate matters, the purchasers and benefactors of healthcare – consumers, payers, and society – all have different opinions as to what constitutes good value. Balancing and resolving these conflicting perspectives is one of the major challenges in the successful transformation of healthcare systems. Today, consumers often have little direct responsibility for bearing the costs of healthcare and their ability to predict healthcare quality is equivalent to a roll of the dice. Payers – public or private health plans, employers, and governments – shoulder the burden of healthcare costs, but often incentivize poor quality care in pursuit of reduced episodic costs. Societies tend to pay little atten- tion to healthcare costs or quality until service levels for healthcare or other societal ‘rights’ are threatened. By 2015, in the win-win scenario we envision, consumers will assume much greater financial oversight and respon- sibility for their healthcare, which, in turn, will drive the demand for value data that is readily accessible, reliable, and understandable. Payers will take a more holistic view of value – looking not simply at the episodic costs of procedures but at how investments in high quality preventive care and proactive health status management can improve quality and help minimize the long-term cost structure of care. Societies will understand that healthcare funds are not limitless and will demand that payment for and quality of healthcare services be aligned to the value those services return both to the individual and to the country or region as a whole. ii
  5. 5. Healthcare 2015: Win-win or lose-lose? The consumer transformation The second key element in the win-win transformation of healthcare systems is increased consumer responsibility for personal health management and maximizing the value received from the healthcare system. As countries are pressed ever closer to the wall of healthcare crisis, the pressure is building for consumers to change coun- terproductive health behaviors and actively participate in their healthcare decisions. Approximately 80 percent of coronary heart disease, 5 up to 90 percent of type 2 diabetes, 6 and more than half of cancers 7-10 could be prevented through lifestyle changes, such as proper diet and exercise. Today, consumers will not or cannot define value in healthcare. Some do not care what healthcare costs because they see it as free or prepaid. Some do care, but find it prohibitively difficult to access meaningful information they need to make sound choices. And still others do not have the literacy skills required to navigate these choices. Compounding the problem is the fact that there is a relatively widespread disregard for healthy lifestyle choices among consumers. The rising rates of obesity and chronic disease and the continuing scourge of HIV/AIDS are all direct indicators of unhealthy choices. By 2015, in the win-win scenario, we believe consumers will comparison shop for healthcare in the same manner that they shop for other goods and services. Health info- mediaries, who will help patients identify the information required to make sound choices, interpret medical infor- mation, choose between care alternatives and channels, and interact with the providers they choose, will become fixtures in the healthcare landscape for both the well and the chronically ill, and for a much broader socioeconomic segment of the population. And, lifestyle choices will be more explicit, with poor choices being accompanied by short-term consequences. The care delivery transformation The third key element in the win-win transformation of healthcare is a fundamental shift in the nature, mode, and means of care delivery. Healthcare delivery is overly focused on episodic acute care; it must shift and expand to include and embrace prevention and chronic condition management in order to respond to the emerging environment. Today, preventive care, which focuses on keeping people well through disease prevention, early detection, and health promotion, is a concept without a champion. Generally speaking, consumers ignore it, payers do not incentivize it, and providers do not profit from it. By 2015, we expect that the notion of preventive healthcare itself will expand, combining Eastern and Western approaches and the best of the old and the new. Consumers will seek this care in new settings, such as retail stores, their workplaces, and their homes, that offer lower prices, enhanced convenience, and more effective delivery channels than traditional healthcare venues. Preventive care will likely be delivered by midlevel providers – including physician assistants, nurse practitioners, nutri- tionists, genetic counselors, and exercise experts – in close coordination with doctors. Today, as the incidence of chronic illness explodes, chronic care management remains expensive, labor intensive, and plagued by wide variations in the effective- ness of care. By 2015, we believe chronic patients will be empowered to take control of their diseases through IT-enabled disease management programs that improve outcomes and lower costs. Their treatment will center on their location, thanks to connected home monitoring devices, which will automatically evaluate data and when needed, generate alerts and action recommendations to patients and providers. Patients and their families, assisted by a health infomediaries, will replace doctors as the leaders in chronic care management, a shift that will eliminate a major contributor to its cost and because of doctor time constraints, its brevity. iii
  6. 6. IBM Global Business Services Preventable medical errors kill the equivalent of more than a jumbo jet full of people every day in the US 11 and about 25 people per day in Australia. 12 Today, acute care is the foundation of the healthcare economy and its effectiveness depends heavily on the expertise of the individual doctor. By 2015, we anticipate that standardized approaches to acute care, developed through the careful analysis of clinical data and the unrelenting documentation of patient variation, will be a widespread starting point in care delivery. The availability of high quality care information will enable the treatment of non-urgent acute conditions, such as strep throat and sinusitis, at the patient’s home via the use of tele- medicine or at retail settings that provide low cost, good quality, and convenience. This will free doctor time and encourage the transformation of today’s massive, general purpose hospitals into “centers of excellence” devoted to specific conditions and combination triage centers, which determine the specialized facility patients should go to, and post treatment recovery centers, in which patients are monitored before returning home. A prescription for accountability and win-win transformation The transformational challenge facing many healthcare systems globally is daunting. They must expand their primary focus on often poorly coordinated episodic care to encompass the life-long and coordinated manage- ment of preventive, acute, and proactive chronic care. This expansion must be achieved with limited incremental funding in an increasingly competitive global economy and healthcare environment. This task will further require the establishment of a clear, consistent accountability framework supported by aligned incentives and recon- ciled value perspectives across key stakeholders. But, the rewards of successful transformation are correspond- ingly high. Successful transformation will require all stakeholders to actively participate, collaborate, and change. The following table summarizes recommendations by stakeholder to collectively transform to a value-based healthcare system with new models of delivering care to accountable consumers. Healthcare 2015 paints a portrait of what the global healthcare industry could look like a decade from now. Parts of the portrait already exist in some countries. Even so, bringing the entire portrait to life is an extraor- dinarily difficult, but vitally important task, which must be informed and achieved through a process of debate and consensus, and action and accountability. We hope that our ideas will serve as a starting point in your transforma- tion effort. iv
  7. 7. Healthcare 2015: Win-win or lose-lose? Transforming value Summary of Healthcare 2015 recommendations by stakeholder. Transforming consumer accountability Transforming care delivery • Remove barriers to innovation while still protecting consumers and other stakeholders • Develop channels and care venues that are closer to the patient • Implement interoperable EHRs to support information exchange across new venues • Expect interoperable EHRs to support information exchange across teams of caregivers • Focus on the opportunities that come with change • Expect and demand new delivery models and coordination of care across these new models • Align reimbursement and incentives with preventive and proactive chronic care, and with innovative, cost-effective approaches to health and healthcare • Help enable new models through simplification and miniaturization; mobile devices; and personalized targeted diagnostic and treatment solutions packages • Keep pressure on the healthcare system to change and meet the needs of its customers • Change and set policies, regulations and legislation in order to remove barriers (e.g., the patchwork of licensure regulations) and to enable and promote the right actions Healthcare systems Care delivery organizations (CDOs) Doctors and other clinicians Consumers Health plans Suppliers Societies Governments • Provide universal insurance for core services, including preventive and primary care • Expect and reward good behaviors • Help inform and empower consumers by providing transparency into pricing and quality • Develop collaborative partnerships with patients • Help consumers take more responsibility for their health • Expect and monitor compliance • Learn about health and take responsibility for living a healthy lifestyle • Create and maintain a personal health record (PHR) to consolidate relevant, accurate clinical and health information • Document advanced directives • Help provide personalized information and advice to help consumers maintain and improve their health status • Help identify the right patients and providers and then educate them to achieve better results across all steps of the care process • Stress prevention and personal accountability • Expect and promote healthy lifestyles • Help protect security/privacy of electronic health information • Require insurance coverage for everyone, with subsidies for those who need them • Develop a vision, principles, and metrics that enable and reward a shared perspective on value • Appropriately focus instead of being “all things to all people” • Develop teams of caregivers to deliver patient-centric, coordinated care • Implement interoperable electronic health records (EHRs) to help enable high-value services • Help develop and appropriately utilize evidence-based, standardized processes and care plans • Help develop meaningful outcomes data • Expect CDOs and clinicians to provide pricing and quality information • Learn about the healthcare system and become a smart shopper • Utilize health infomediaries • Work collaboratively with CDOs and clinicians to develop a viable transition plan to value-based reimbursement • Help consumers navigate the health system to get more value • Develop offerings that help provide better longer-term outcomes or lower prices for equivalent outcomes • Clearly recognize the need for tough decisions, prioritization, and tradeoffs and the need to reconcile perspectives on value • Actively participate in efforts to improve healthcare • Emphasize value, accountability, and alignment of incentives in health policy, regulations, and legislation • Require results reporting • Develop a funding strategy for the healthcare infrastructure and for independent research on the comparative effectiveness of alternative therapies v
  8. 8. Healthcare 2015: Win-win or lose-lose? Contents 1. Introduction 2 Unsustainable growth 2 The transformational challenge 2 The universal need for accountability 3 Summary 3 2. Healthcare in crisis: win-win or lose-lose transformation? 4 Introduction 4 Drivers of change in healthcare 4 Inhibitors of change in healthcare 12 Transformation: four change scenarios 14 Which countries will be up to the challenge? 16 Transforming into the era of action and accountability 16 3.Transforming value 18 Introduction 18 The eye of the purchaser 18 Hierarchy of healthcare needs model 21 Value needs vary with hierarchy level 22 Value perceptions vary with the hierarchy level 23 Summary 25 4.Transforming consumer responsibility and accountability 26 Introduction 26 Information access 26 Comparison shopping for healthcare 27 Rise of the health infomediary 27 Better health through better lifestyle decisions 28 Summary 29 5.Transforming care delivery 30 Introduction 30 Preventive care 31 Chronic care 34 Acute care 36 Summary 40 6. A prescription for accountability and win-win transformation 41 Introduction 41 Healthcare systems 41 Payers 45 Care delivery organizations (CDOs) 47 Doctors and other caregivers 48 Suppliers 49 Consumers 50 Societies 51 Governments 52 7. Conclusion 54 8. About the authors 56 9. Acknowledgements 56 10. References 57 Healthcare 2015: Win-win or lose-lose? A portrait and a path to successful transformation
  9. 9. IBM Global Business Services 1. Introduction Unsustainable growth Fueled by the unrelenting pressures of cost, quality, and access, we believe the first two decades of the 21st century are the era in which healthcare systems around the globe will be driven into crisis. Consumers worldwide are demanding more and better healthcare services. Yet, in virtually every country, the growth in healthcare demand is increasing more rapidly than the willingness and, more ominously, the ability to pay for it. If left unaddressed, financial pressure, service demands driven by aging populations and other demographic shifts, consumerism, expensive new technologies and treatments, and the increased burden of chronic and infectious diseases will cause most of the world’s coun- tries to reach a breakpoint in their current paths. In other words, their healthcare systems will likely “hit the wall” – be unable to continue on the current path – and then, require immediate and major forced restructuring. The United States is one of the best, or more appropri- ately, worst examples of a runaway healthcare system. Per capita, the United States spends more on healthcare than any other country in the Organisation for Economic Co-operation and Development (OECD) – 22 percent more than second-ranked Luxembourg, 49 percent more than third-ranked Switzerland, and 2.4 times higher than the OECD average. 1 Unfortunately, this spending has not produced a commensurate improvement in the country’s healthcare quality. The World Health Organization (WHO) ranks it 37th in overall health system performance 2 and a recent study by The Commonwealth Fund concluded, “The United States often stands out for inefficient care and errors and is an outlier on access/cost barriers.” 14 The United States may not stand alone; other countries may also have unsustainable healthcare systems. For instance, if current trends are not reversed in Ontario, Canada’s most populous province, healthcare will account for 50 percent of governmental spending by 2011, two-thirds by 2017, and 100 percent by 2026. 3 “The baby boom is about to become a patient boom,” warned Ontario Premier Dalton McGuinty. The challenges posed by unsustainable growth are massive and grave. Muddling along on the current path, which has been the common response to the periodic calls for structural change in healthcare in the past, is no longer a viable course. Tough choices will have to be made to avoid hitting the wall in healthcare. But, no matter how difficult these choices, they are surely prefer- able to the choices that will be thrust upon any country that ignores the coming crisis. The transformational challenge It is difficult to generalize the global challenge of health- care transformation. There are over 190 countries in the world, each with a healthcare environment that is uniquely affected by population health status, healthcare funding mechanisms and levels, societal expectations, and healthcare delivery system capabilities. Accordingly, the transformation path that each national healthcare system adopts must address different starting points, needs, expectations, and targets. Even so, there are several transformational challenges that we believe are universal. First, healthcare systems must expand their current focus on episodic, acute care to encompass the enhanced management of chronic diseases and the life-long prediction and prevention of illness. This trans- formation requires patient-centric care orchestrated by health infomediaries – professionals whose aim is to help consumers optimize their health and navigate the healthcare system – and delivered by teams of clinicians heavily populated by midlevel providers. To support this expanded provision of care, interoperable electronic infor- mation systems and new physical and virtual delivery venues are also needed. Second, consumer attitudes and behaviors must be transformed. Consumers must assume personal respon- sibility for their health. They must abandon the naive and financially unsustainable attitude that “someone should and will pay to fix whatever goes wrong with me, regard- less of cause, cost, or societal benefit.” Healthcare 2015: Win-win or lose-lose? A portrait and a path to successful transformation
  10. 10. Healthcare 2015: Win-win or lose-lose? Third, societal expectations and norms must be trans- formed in tandem with the changes in consumer attitudes and behaviors. The citizens of countries around the globe will have to determine how much healthcare will be a societal right and how much will be a market service. Norms will have to change. Unhealthy lifestyles have to become as unacceptable as driving while under the influence of alcohol and smoking in public places have become in some societies. Fourth, there must be a transformation in the willingness of governments to acknowledge the crisis in healthcare and more importantly, guide their countries to sustain- able solutions. Without strong leadership and political willpower, national healthcare systems cannot change in a rational fashion. Further, changes in societal expecta- tions and norms often require supporting governmental action. The world’s governments will have to take a long view that extends beyond the terms of elected offi- cials. The larger needs of equitable policy and funding will have to take precedence over short-term pain and special interest groups. The universal need for accountability Accountability is the force that will help enable the global transformation to sustainable healthcare systems. Today, most countries’ healthcare systems lack a clear frame- work for accountability, a support that is urgently needed to increase responsibility among all stakeholders. From governments taking responsibility for financing and policy to healthcare professionals taking responsibility for devel- oping and following evidence-based clinical standards and delivering quality care to citizens taking responsibility for their own health, accountability must span the health- care system. The incentives of stakeholders must be aligned to support the emergence of a viable accountability frame- work. Realigning incentives within healthcare systems is a daunting task, particularly given the entrenched positions of key stakeholders, including hospitals, public/ private insurers, doctors, and consumers. In the near term and as incentives are realigned, stake- holders will have to be prepared and willing to make sacrifices. Current governmental policy and regulations must also be realigned to support the new framework of accountability. Otherwise, these policies and regulations, which were instituted in and for a different healthcare environment, may well inhibit transformational change. Finally, the key stakeholders must reconcile their different perspectives on value in order to align incentives. Today, the various purchasers and consumers of healthcare products and services independently define and deter- mine value, often in conflicting ways. In the future, value must also have a shared, systemic component that all stakeholders will recognize and support. Summary In the absence of major change, we believe many of the world’s countries will hit the wall with regards to health- care cost, quality, and access within the next decade. The creation of a sustainable healthcare system is a substantial challenge and the consequences of failure are daunting, but the rewards of successful transfor- mation are correspondingly high. Countries that are successful will be able to leverage the benefits of new medical technologies and treatments to create the healthiest citizenries in history. They will enjoy the bene- fits of a lower cost structure and enhance their ability to attract and retain the world’s most talented people. They will be able to better compete in the many industries of the global economy, including the emerging global healthcare industry. This leads us to two key questions. How likely is a healthcare system to hit the wall? And, how prepared are its stakeholders to confront the challenges and successfully transform their systems? In the next section, we will explore the factors that can help you answer those questions.
  11. 11. IBM Global Business Services 2. Healthcare in crisis: win-win or lose-lose transformation? Introduction Healthcare is rightly described as a complex adap- tive system. 15 At any given time, there are a significant number of internal and external forces that are driving and inhibiting change in such systems. The amount of change that occurs in a system depends in part on the cumulative strength of the drivers versus the inhibitors. Of course, the strength of these driving and inhibiting forces will vary between healthcare systems, but they are major factors in each system’s evolution. Drivers of change in healthcare A driver is a factor that stimulates change. It is important to distinguish between a driver and a trend. A driver is a force that will change the status quo and must be addressed at some point. A trend, on the other hand, is a current tendency or preference that may or may not cause substantive change and does not necessarily require a response. We have identified five drivers of change in healthcare: globalization, consumerism, aging, and overweight populations, the changing nature of disease, and new medical technologies and treatments. Globalization – Globalization is a historic driver of change. Today, as ubiquitous computing power, software applications, and broadband connectivity combine to transform the earth into a high-speed network of seem- ingly limitless possibility, its influence and impact is accelerating. The global supply chain in manufacturing is a reality. In the services sector, intellectual work and capital are being delivered virtually anywhere and every- where in the world. The world is flat, proclaims Thomas Friedman in his best-selling book, which describes how globalization is affecting everyone on the planet. 16 Healthcare, which has remained largely regional and local to date, has not escaped globalization unscathed. The financial pressure arising from globalization is having the greatest and most obvious impact on healthcare systems. In many countries, competing on a worldwide basis is causing substantial shifts in their revenue bases and forcing alterations in their funding choices and spending patterns. Globalization is also laying the foun- dation for healthcare without borders. Further, as this driver gives rise to new social and political models, it will also irrevocably alter the environment in which health- care operates and the key stakeholders who determine its course. In some cases, particularly when globalization negatively impacts competitiveness, the inability to service health- care costs may precipitate financial crises. For instance, in the United States, the financial pressure of globaliza- tion is colliding with what government, businesses, and individuals alike perceive as runaway healthcare costs. Healthcare spending in the United States currently accounts for more than 16 percent of the country’s gross domestic product (GDP), approximately US$2.0 trillion. 17 To put this figure in perspective, as of 2005, only five other countries had GDPs as large as or larger than the United States’ healthcare expenditures. 18 In other cases, globalization will continue to raise soci- etal expectations and fuel the demand for ever greater healthcare spending. In China, a notable benefactor of globalization, healthcare spending as a percentage of GDP is increasing and the government has made signifi- cant progress in expanding healthcare coverage. Yet, 39 percent of the rural population as well as 36 percent of urban population cannot afford professional medical treatment.4 Consumerism – Consumerism in healthcare is part of a broader movement promoting consumer interests and placing more power and control in the hands of individuals. In healthcare, consumerism is producing increasingly assertive buyers who are willing and able to promote and defend their interests. We have all heard the stories of “literate health activists” who show up in clinicians’ offices with a wealth of infor- mation – accurate and inaccurate – about their conditions and demand a larger say in their care decisions. They
  12. 12. Healthcare 2015: Win-win or lose-lose? are “literate” because they have the desire and capacity to obtain and understand the basic information needed to make appropriate health decisions. They are “activists” because they are no longer willing to accept the passive role of the traditional patient, meekly accepting whatever the healthcare system offers them or does to them. Many of these people are aging baby boomers who have growing healthcare needs and the ability to pay for treat- ment. They have high expectations for both service and clinical quality and little tolerance for “one-size-fits-all” services and solutions. Defining developed, developing, and least developed countries For the purposes of this report, United Nations’ country classifications 19,20 have been adapted to classify countries into three major groups based on criteria such as economic status; personal income levels; and health, education, and nutrition factors: • “Developed” countries are made up of the 30 OECD members which include countries in Europe, North America, and Asia and the Pacific. • “Developing” countries include countries in the Middle East, East Asia and the Pacific, Latin America and the Caribbean, South Asia, Southern Europe, and Sub-Sahara Africa. Notable countries in this group include China, India, Brazil, and South Africa, as well as Russia and other Eastern European countries. • “Least developed” countries include 50 countries in Africa, Asia and the Pacific, and Caribbean region. The Commonwealth of Independent States (CIS), which is comprised of 11 former Soviet Republics and is classified by the UN as a distinct group, is separated into developed and developing countries according to the condition of each country. 21 We believe a number of factors will accelerate the influ- ence of consumerism on healthcare. In developed countries, the increasing financial burden for healthcare costs borne by the consumers will continue to be a factor. In developing countries, the growing middle class, who are better educated and more affluent, will expand the number of literate health activists. A growing awareness of risks and adverse events will also drive consumerism in healthcare. The fact that preventable medical errors kill the equivalent of more than a jumbo jet full of people every day in the United States 11 and about 25 people per day in Australia is becoming widely known. 12 Literate health consumers are less and less willing to accept negative outcomes as inevitable or as the luck of the draw. In short, people who are bearing a significant portion of the financial burden for healthcare and are more knowledgeable about the risks posed by healthcare, will be much more demanding consumers. Aging and overweight populations – Demographic shifts, which will require the re-examination of resources and priorities as well as the development of new care paradigms, are also likely to drive healthcare change. Primary among these shifts is the aging of the worldwide population. Before the first decade of the new millen- nium, young people always outnumbered old people; after it, old people will outnumber young people. In 2005, people aged 60 years and older accounted for a larger portion of the world population (10.4 percent) than chil- dren aged four years and younger (9.5 percent). 22 One impact of this change in the ratio of older to younger citi- zens is that there will be fewer younger workers available to fund the needs of the older generation.
  13. 13. IBM Global Business Services Another impact is the increased healthcare demand and costs associated with aging. In 1999, in the United States, people aged 65 years and older made up 13 percent of the population, but consumed 36 percent of the country’s personal healthcare spending. This represents four times the amount of per person spending for people under age 65 years. 23 The disproportionate need for and spending on healthcare among older people is consistent throughout many countries (Figure 1 represents per capita healthcare spending as a percentage of per capita gross domestic product by age for males and females). The second demographic driver affecting the overall health profile of the planet is the alarming increase in the number of overweight people with all of the additional and well-established risk of disease that entails. There are now more overweight people in the world than there are underweight people. 24 The World Health Organization reported: “Globally, in 2005, it is estimated that over 1 billion people are overweight, including 805 million women, and that over 300 million people are obese… If current trends continue, average levels of body mass index are projected to increase in almost all countries. By 2015, it is estimated that over 1.5 billion people will be overweight.” 25 Figure 2 illustrates this looming increase. The changing nature of disease – We believe one of the most profound drivers of healthcare change is the growing incidence and impact of chronic illness. Chronic diseases now account for 60 percent of the 58 million deaths globally each year and represent a significant economic burden on societies worldwide. 25 As much as 75 percent of the healthcare resources of developed countries are consumed by the needs of those with chronic conditions. 26 FIGURE 1. Healthcare expenditures among European Union Member States by age and gender. 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100+ Source: Economic Policy Committee and the European Commission. 2006. The impact of ageing on public expenditure: projections for the EU25 Member States on pensions, health care, long-term care, education and unemployment transfers (2004-2050). Special Report No 1/2006, DG ECFIN, February 14, 2006. Note: “European Union-15” refers to the European Union Member States of Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, Netherlands, and United Kingdom. “European Union-10” includes those Member States that joined the European Union on 1 May 2004: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Although the two sets of lines illustrate that nominal healthcare spending is higher among the European Union-15 than European Union-10, both illustrate the general relationship between healthcare expenditure and age. European Union-15 males European Union-15 females European Union-10 males European Union-10 females AveragehealthcareexpenditureperpersonasashareofGDPpercapita Age (years)
  14. 14. Healthcare 2015: Win-win or lose-lose? 10% 10-24.9% 25-49.9% 50-74.9% 75% No data 10% 10-24.9% 25-49.9% 50-74.9% 75% No data FIGURE 2. Prevalence of overweight (body mass index ≥ 25 kg/m2 ) by gender, 2005 and 2015. Men aged 30 years and older, 2005 Men aged 30 years and older, 2015
  15. 15. IBM Global Business Services Women aged 30 years and older, 2005 Women aged 30 years and older, 2015 10% 10-24.9% 25-49.9% 50-74.9% 75% No data 10% 10-24.9% 25-49.9% 50-74.9% 75% No data Source: World Health Organization. 2006. WHO global infobase online. (accessed 1 June 2006)
  16. 16. Healthcare 2015: Win-win or lose-lose? Not only are chronic diseases responsible for a growing percentage of the total deaths in developed countries, the incidence of chronic disease in developing and least developed countries is also on the rise. Worse, these so- called diseases of affluence are actually more prevalent among low and middle-income people, where 80 percent of deaths are due to chronic disease. In all geographies, the poorest populations – those who have the greatest exposure to risks and the least access to health services – are affected most significantly (Figure 3). 25 Over the next 10 years, the global incidence of chronic disease is predicted to increase by 17 percent, further fueling the global burden of disease. 25 Several factors account for this driving force: • The success of modern healthcare in transforming formerly lethal diseases, injuries, and conditions (e.g., HIV, spinal cord injuries, diabetes, tuberculosis, and multiple sclerosis) into chronic conditions that require continuous treatment; • Reductions in premature mortality and increasing longevity resulting in longer-lived chronic conditions and health-related dependencies; and • Increases in the behaviors (e.g., unhealthy diet, physical inactivity, and tobacco use) that significantly contribute to many prevalent chronic diseases. The growing incidence of chronic conditions will likely continue to impact the provision of health services. Chronic conditions (e.g., diabetes, arthritis, chronic lung disease, asthma, congestive cardiac conditions, mental illness, and hypertension) require ongoing care and management. They are not amenable to one-shot fixes. Yet, most healthcare systems are organized to provide episodic care. They are neither structured nor resourced for the coordinated, ongoing care of chronic diseases. A striking example of the mismatch between the needs of chronic conditions and care delivery is the reliance on doctor office visits. A ten-minute increment of a doctor’s time is not conducive to effective chronic disease management or patient education. FIGURE 3. Projected main causes of death for all ages and select countries, 2015. Source: World Health Organization. 2005. Preventing chronic disease: a vital investment. Geneva: World Health Organization. Age-standardized mortality rates per 100,000 lives Brazil Canada China PakistanIndia Nigeria Russian Federation 1,200 1,000 800 600 400 200 0 Communicable, material and perinatal, and nutritional deficiencies Chronic disease Injuries United Republic of Tanzania United Kingdom
  17. 17. 10 IBM Global Business Services Infectious disease will likely be a second driver of health- care change in this category. Some diseases, such as tuberculosis and malaria, have become drug-resistant or even multi-drug-resistant. Other diseases, such as AIDS, can now be kept in check for long periods of time, but not cured. Still other diseases, such as polio, are re-emerging in certain regions along with the attendant long-term debilitation of their victims. Finally, new infec- tious diseases against which humans have little immunity are appearing (see sidebar). All of these are contributing to the ever-rising costs of healthcare and the ever-greater need for change. New medical technologies and treatments – We believe innovative new medical technologies will continue to drive change in healthcare. They promise improved population health and higher quality care. But this promise will often include higher unit costs and greater overall demand, which may well result in higher aggre- gate costs, particularly during the early phases of their development and growth. Genomics, regenerative medicine, and information-based medicine are three rapidly emerging technologies that will be major drivers of healthcare change. Genomics Genomics is a broad term defining the study of the func- tions and interactions of genes, molecular mechanisms, and the interplay of genetic and environmental factors in disease. Three areas of genomics have the greatest potential to significantly impact healthcare over the next decade and beyond: molecular diagnostics, pharma- cogenomics, and targeted therapies. • Molecular diagnostics – There are approximately 900 gene tests available today, including single gene (monogenic) disorder testing, chromosome testing, biochemical testing, predisposition testing, prenatal screening, and pre-implantation genetic diagnosis (PGD) of fertilized embryos, and forensic identification. Tests like these have already enabled the diagnosis of Down Syndrome, spina bifida, Tay-Sachs disease, sickle-cell anemia, cystic fibrosis, etc. The number of gene-based tests is rising dramatically and over the next decade, we will see tests of ever-higher sensi- tivity and specificity. By 2015, it is likely that a single US$1000 test will analyze millions of DNA fragments for evidence of disease. 28 • Pharmacogenomics – The developing field of phar- macogenomic profiling analyzes genetic variation to predetermine how individual patients will respond to specific drug treatments. It promises to improve therapy risk assessment, to better target drug therapy, and most dramatically, to reduce and perhaps someday, eliminate the adverse drug reactions that injure or kill 770,000 people per year in the United States alone. 29 Currently, the United States Food and Drug Administration (FDA) is considering the use of a pharmacogenetic test that will enable doctors to prescribe the exact dosage of the blood thinner warfarin. 30 In the near future and because of its rela- tively low cost compared to the cost of an adverse reaction, pharmacogenetic testing will become a standard of care. Emerging diseases27 1973 – Rotavirus 1977 – Ebola virus 1981 – Toxic shock syndrome 1982 – Lyme disease 1983 – HIV/AIDS 1991 – Multidrug-resistant tuberculosis 1993 – Cholera caused by strain 0139 1994 – Cryptosporidium infection (large outbreak in Wisconsin, USA) 1998 – Avian flu 1999 – West Nile Virus (first appearance in USA) 2003 – SARS (severe acute respiratory syndrome) 2004 – Marbu virus (largest outbreak in Angola)
  18. 18. 11Healthcare 2015: Win-win or lose-lose? • Targeted therapies – One of the goals of genomics is to design targeted treatments (e.g., for tumors, arthritis or osteoporosis) that are based on specific molecular signatures. Numerous cancer therapies are available that target individuals with specific genetic profiles. For instance, Herceptin/ Trastuzumab, a genetically engi- neered drug for metastatic breast cancer, is estimated to extend the median survival of patients with a specific gene (HER-2/neu) by several months. “Designer drugs” like these are expected to become increasingly available in the future, but will also pose major cost challenges. Herceptin has resulted in US$125,000 per quality-adjusted life year (QALY) gained, which may exceed acceptable or affordable societal thresholds for treatments, frequently in the US$50,000 range today. 31 Regenerative medicine Stem cell research is advancing our knowledge regarding how all living things develop from a single cell and how healthy cells replace damaged cells in adult organ- isms. It has been a field of ongoing inquiry for over two decades, but remains highly controversial and much debated, particularly in areas such as cloning. The thera- peutic use of stem cells to treat disease, which is often referred to as regenerative or reparative medicine, prom- ises to have a major impact on healthcare. Today, donated organs and tissues are often used to replace ailing or destroyed tissue, but the need for transplantable organs and tissues far outweighs the available supply. Stem cells, directed to differentiate into specific cell types, offer a potentially endless renew- able source of replacement cells and tissues, changing the way we treat a wide variety of diseases, including Parkinson’s and Alzheimer’s diseases, spinal cord injuries, strokes, burns, heart diseases, diabetes, osteo- arthritis, and rheumatoid arthritis. In March 2004, the FDA approved a clinical trial at the Texas Heart Institute that utilized stem cell therapy to treat patients with advanced heart disease. The trial provided the first clear documentation of the formation of new blood vessels in the human heart and suggests that stem cell injections can treat this previously incur- able disease. 32 In the next decade, we expect that new applications will multiply exponentially. At the same time, we also expect that stem cell research and regenerative medicine will be centers of continued controversy and regulatory pressures. Information-based medicine Information-based medicine is the process of improving existing medical practices through the effective use and application of information in the diagnosis and treat- ment of patients.  In order to fully realize its potential, researchers and practitioners must possess the ability to access, integrate, and analyze data encompassing a patient’s clinical history, genotype (i.e., genetic makeup), and phenotype (i.e., the properties produced by the interaction of genotype with the environment).  As clinical care and research become increasingly “digitized,” this vision – a distant possibility only a few years ago – is becoming a reality. Currently, healthcare organizations around the world are establishing platforms for information-based medicine.  Australia’s Melbourne Health and Bio21 have integrated a wide range of databases to support collaborative research and leverage critical biomedical information. In the United States, The Mayo Clinic provides its clinicians and researchers with real-time access to and search capability of over six million patient records. Sweden’s Karolinska Institutet is establishing a national “biobank” – a biospecimen repository supple- mented with clinical data – that will greatly enhance the ability of researchers to identify genetic and envi- ronmental factors, and their interplay, in the cause and outcomes of disease.  In each case, information queries that once required days, weeks, and even months, now take seconds and minutes. Integrated information infrastructures for clinical and translational research will enable and support the development of advanced Clinical Decision Intelligence (CDI).  By mining biomedical and outcome data, health researchers can identify best clinical practices and new molecular breakthroughs. This knowledge will also be applied at the point of care in the form of advanced rules to help guide clinicians. Early CDI applications are being developed at the University of British Columbia’s iCAPTURE Centre, in Canada, to improve organ transplant outcomes; at
  19. 19. 12 IBM Global Business Services Molecular Profiling Institute, Inc. in the United States to create targeted, molecularly diagnosed cancer treat- ments; and at Canada’s Ste. Justine Pediatric Research Centre to improve the treatment of pediatric cancers. Information-based medicine will help drive the transfor- mation of healthcare from its current local and regional sectors into a borderless industry that spans the globe. It will better enable practitioners to make more accu- rate diagnoses and targeted treatments and also help researchers to discover new cures. Additionally, patients will access and manage their personal health information and share critical information with their doctors and other caregivers. In summary, we believe these five change drivers – globalization, consumerism, demographics, chronic and infectious diseases, and new, expensive technologies and treatments – are and will continue to upset the status quo of healthcare systems throughout the world. Crises in healthcare systems are not new per se, but these drivers are creating a healthcare environment that is fundamentally different from past periods of crisis. These drivers are creating higher costs, burgeoning demand, and increasing regulation. Healthcare systems will have to fundamentally adjust to their dictates. Inhibitors of change in healthcare No healthcare system is immune to the drivers of change, but the extent to which the drivers actually create change is also dependent on a variety of inhibiting factors. An inhibitor is defined as a force that supports the status quo, prevents change, and/or creates barriers to the forces driving the change. The strength of these inhibi- tors helps determine the healthcare systems’ resistance or willingness to change. At any given time, the amount of change occurring – incremental or transformational – depends in part on the cumulative strength of the driving forces compared to the inhibiting forces. Financial constraints – Funding constraints are consis- tently ranked among the chief inhibitors of change in healthcare systems. Unfortunately, the pool of funds available to finance healthcare is not limitless. Healthcare must compete for funding with a wide range of other needs, such as physical infrastructure and education. In many countries, this competition results in healthcare funding shortfalls that make it impossible to cover the full spectrum of needs from basic public health to treating end-stage diseases. The existing allocation of healthcare funding is another barrier to change and strong support of the status quo. Whenever new funding is unavailable, existing funding must be reallocated to finance change. Naturally, resis- tance arises from those stakeholders who will face reduced funding. In addition, investments in emerging or as yet unproven programs also meet with resistance. In both cases, conflict is generated among stakeholders and the ability to appropriately allocate funding to achieve the greatest good is impacted. Societal expectations and norms – Societal expec- tations and norms, especially those regarding rights, lifestyles, and acceptable behaviors, can also inhibit change. Some healthcare services – clean water, sound sewage systems, basic nutrients, and basic medical care – are uncontroversial and widely accepted as societal rights. Others, such as cosmetic surgery and lifestyle drugs, are clearly considered “elective” market services. But there are many gray areas, where there is no clear delineation between societal rights and market services, in which heated battles will be fought. Will tough choices be necessary? From the beginning of human society, the demands of sustain- ability have raised profound ethical issues. In traditional Inuit society, when elders sensed that they had become a burden on their families and were compromising the family’s survival, they voluntarily sought death in the cold. Today’s healthcare systems are dealing with choices that are just as hard and explicit. In 1993, New Zealand passed legislation that set out to secure “the best health, the best care, and the greatest independence for its citizens within the limits of available funding.” This resulted in several very high-profile lawsuits brought on behalf of elderly New Zealanders who were denied access to renal dialysis because they also suffered from other serious and non-remedial health conditions. The decisions to withhold care were upheld in the courts. 33
  20. 20. 13Healthcare 2015: Win-win or lose-lose? Issues around the right to healthcare are especially diffi- cult because there is virtually no limit to the amount of healthcare resources an individual can consume. Some interpret this to mean that “someone else should pay to fix whatever goes wrong with me, regardless of reason, cost, or societal benefit.” These decisions will be difficult, even if metrics have been defined and quantified. For example, US$50,000 per quality-adjusted life year (QALY) gained has been considered as a threshold for cost- effective treatments. Who will dare to decide to withhold effective treatments that exceed the threshold? Lifestyle expectations can be equally contentious. Will treatment for a 65-year-old who has “normal” use of his shoulder but needs surgery to remain a competitive tennis player, be a societal expectation as populations continue to age? The stakeholders within healthcare systems will have to decide which lifestyle expectations are reasonable and which are not – resetting the balance between societal rights and market services – or risk ”hitting the wall.” Social norms around acceptable behaviors can have a similar inhibiting effect. Societies that embrace behaviors such as tobacco and alcohol consumption can inhibit the development of personal responsibility. In least devel- oped countries, these inhibiting behaviors may stem from a seemingly irrational resistance to vaccines and vitamins or from a “culture of bribery,” which forces people to pay for societal healthcare services that are intended to be free. 34 In developed countries, norms such as religious beliefs can inhibit technological advances such as stem cell research, 35 genetic engineering, and cervical cancer vaccinations. 36 Societal norms regarding the security and privacy of personal information can also impact the development of information-based medicine. Under the European Union’s Directive on Data Privacy, some types of information cannot be collected without the individual’s consent. 37 In the United States and despite the implementation of national privacy protections under Health Insurance Portability and Accountability Act of 1996 (HIPAA), a poll by the California HealthCare Foundation and the Health Privacy Project revealed that 67 percent of adults are concerned about the privacy of their medical records. 38 Lack of aligned incentives – The barriers to health- care change are typically exacerbated by the lack of alignment in the incentives among stakeholder groups. Realigning incentives is a daunting task that is further complicated by governmental policy and regulations, many of which were instituted in and for different health- care environments. Major alignment issues revolve around the quality and timeliness of care. In the United Kingdom, for example, most general practitioners (GPs) earned a large portion of their income from capitation payments from the National Health Service (NHS). They were rewarded for having a large number of registered patients instead of quality of care. The NHS has begun addressing this disconnect; in 2004, it implemented a new contract aligning GP earnings with 146 performance metrics. 39 In Canada’s healthcare system, extended wait times have created a crisis in patient access. Canada is studying reward mechanisms that will encourage clinicians and administrators to reduce the wait times for surgery. 40 Misaligned financial incentives also inhibit the rational management of healthcare institutions. In China, where the government has set many fees below cost, hospitals are incentivized to oversupply the few profitable prod- ucts and services, such as medications. 41 As a result, 85 percent of all medications are sold through hospitals and at prices generally higher than in the pharmacies. China’s hospitals receive up to 44 percent of their income from the sale of drugs. 42 In the United States, there is a tangle of conflicting incen- tives among key stakeholders. Employers, who provide most of the health insurance for their employees, are focused on balancing costs against the benefits required to attract and retain viable employee bases. On the payer side of the industry, the incentive is to minimize and slow payments to attain the most attractive medical loss ratios. The fee-for-service environment encourages clini- cians and other providers to prescribe more services and more procedures. And insured patients, who often bear little direct financial liability, demand whatever they may desire regardless of cost.
  21. 21. 14 IBM Global Business Services Inability to balance short-term and long-term perspectives – The inability to formulate, agree upon, and act from a long-term perspective can be a serious inhibitor of change in healthcare. Of course, when health- care systems are on unsustainable paths, the longer that stakeholders take to appropriately balance long-term and short-term thinking, the more drastic and difficult the decisions required to avoid hitting the wall become. Many governments ignore the problem of unsustain- able growth in the long-term and focus instead on more “urgent” short-term needs and wants, particularly those pertinent to the coming election. Private payers are reluc- tant to accept even relatively minor costs today to avoid higher future costs. Many consumers are reluctant to adopt healthy lifestyles today, when the benefits of deci- sions to eat well and exercise regularly may not be fully realized for many years. Inability to access and share information – Information is an inhibitor as well as an enabler of change. Non- digital and digital healthcare data is being generated at unprecedented rates. The volume at which digital and non-digital data is accumulating and the speed with which it is proliferating is creating an indigestible information glut. For example, Canada’s 60,000 doctors face 1.8 million new medical papers in 20,000 journals and 300,000 clinical trials worldwide each year. These doctors also face the onerous task of storing, organizing, accessing, and integrating large amounts of patient data (see sidebar). 43 At the same time, the information- intensive healthcare industry is years behind other less information-intensive industries in the development of its IT infrastructure. The volume of patient information for Canadian doctors43 Office-based doctor visits 5,367 322,000,000 Diagnostic images 583 35,000,000 Laboratory tests 7,333 440,000,000 Prescriptions 6,367 382,000,000 The challenge is how to facilitate healthcare decisions by getting the right information in the right form to the right person at the right time. Infrastructure and process are key issues here. In developing and least developed countries, the absence of information infrastructure and serious deficiencies in existing infrastructures is a clear barrier to change. In developed countries, the challenge revolves around standards-based systems interoperability and the reengineering of processes that are inefficient and/or counterproductive, yet firmly entrenched. The technology exists to solve these problems, but the chal- lenge becomes ever greater as information proliferates at unprecedented rates. In summary, we believe these five inhibitors – financial constraints, societal expectations and norms, misaligned incentives, short-term thinking, and the proliferation of information – are and will continue to create resistance to change in healthcare systems throughout the world. Each will have to be overcome in the process of mapping and navigating a new, sustainable healthcare path. Transformation: four change scenarios To construct a view of an individual healthcare system’s future, the strength of and interactions between the various forces driving and inhibiting change must be evaluated. We can map this relationship in the form of a matrix (Figure 4). The horizontal axis of the matrix maps the overall force for change created by the five drivers. The vertical axis maps the system’s willingness and ability to change as determined by the five inhibitors. The resulting matrix yields four general change scenarios. While there are many possible futures for healthcare systems, we believe that each will represent a variation on one of these scenarios. Per doctor each year Total each year
  22. 22. 15Healthcare 2015: Win-win or lose-lose? 1. More (or less) of the same – In this scenario, the drivers are not sufficiently strong to stimulate major change and the country’s healthcare system is neither willing nor able to change. A country might experience such a scenario if terrorism or a pandemic caused a major disruption in globalization. In such a case, the country and its healthcare system could become more, rather than less, isolated. The costs for companies competing within the country would be relatively equal and might become less of a factor driving change in healthcare. However, equilibrium would be the best case here. In becoming more isolated, most countries would be unable to sustain their current levels of overall healthcare spending and would likely experience “less of the same” in the form of forced eliminations and/or rationing of healthcare services. 2. Continued incremental reform – Again, in this scenario, the drivers do not create an urgent need for change. But, the country is willing and able to change its healthcare system. In the absence of strong drivers, change would be incremental and piecemeal at best. Short-term considerations would likely triumph over long-term needs, because the impetus for fundamental change would not be strong enough to overcome the attendant pain. This scenario reflects the path on which most healthcare systems are currently traveling, regardless of the strength of the drivers on a specific country. 3. Lose-lose transformation – In this worst-case scenario, the drivers for change continue to build as expected, but the country’s healthcare system is unwilling or unable to change. In this “hit the wall” situation, fundamental change that no one wants is forced on the healthcare system. The lose-lose scenario creates unintended consequences both for the healthcare system and for the country. How might such a scenario play out? Using the United States as an example, we might see uncontrolled costs result in a government-funded, single-payer system, forced reductions in service fee schedules, and the elimination and rationing of covered services. This could significantly impact doctor salaries and satis- faction, resulting in fewer doctors overall. It could stifle innovation, since there would be less incentive for companies to develop new treatments and tech- nologies. Consumers could be forced to accept “one-size-fits-all” healthcare or incur much higher expenses for the many services not deemed societal needs. We might see businesses and individuals immi- grating to other more desirable geographic locales. Government might then be faced with diminished revenues leading to reductions in services. A classic vicious cycle could develop with virtually all stake- holders losing. 4. Win-win transformation – In this most desirable scenario, the drivers create an urgent need for change as expected and the country is both willing and able to transform its healthcare system. Given the fact that fundamental change is rarely simple or easy, the resulting change is not painless, but in the long-term, it is the best hope for creating a sustainable health- care system. Sections 3-6 of this report are devoted to describing this scenario in greater detail and prescribing the actions needed to attain it. FIGURE 4. Healthcare transformation matrix. Source: IBM Institute for Business Value analysis. More (or less) of the same Continued incremental reform Win-win transformation • Alignment • Accountability N Y N Y Lose-lose transformation • Unintended consequences - Healthcare industry - The country • Healthcare industry viewed negatively Drivers ContinueWillingnessandabilitytochange
  23. 23. 16 IBM Global Business Services Which countries will be up to the challenge? You cannot map a viable path into the future without knowing where you stand today. In other words, transfor- mation requires a baseline. There are four categories to consider in establishing an individual country’s position on the transformation matrix and its ability to undertake change successfully: • First, transformation requires the availability of sufficient funding and the ability to prioritize and spend these funds properly. • Second because there is virtually no limit to the health- care resources an individual can use, consumers – in their expectations, social norms, and the willingness to change behaviors – play an essential role in the trans- formation. • Third and regardless of the portion of financing and delivery that is public or private, governments – for policy and, of course, funding – are indispensable agents of change. • Fourth, successful transformation is dependent on the adaptability the healthcare system’s infrastructure and the reaction and response of its key stakeholders. In considering each of these elements, the questions and metrics in Table 1 can serve as a starting point in assessing a country’s current transformational capabilities. Transforming into the era of action and accountability No matter what barriers stand between a healthcare system’s current state and the achievement of a win- win transformation, action and accountability are basic ingredients of change. We believe those countries that successfully transform their healthcare systems will: • Focus on value – Consumers, providers, and payers (public or private health plans, employers, and govern- ments) will increasingly direct healthcare purchasing, delivery of healthcare services, and reimbursement based on a shared definition of value. • Develop better consumers – Consumers will make better lifestyle choices and become wiser purchasers of healthcare services, frequently with the help of health infomediaries. • Create better options for promoting health and providing care – Consumers, payers, and providers will increasingly seek out more convenient, effective, and efficient means and settings for healthcare delivery. Sections 3-6 articulate our vision for a successfully trans- formed healthcare system (i.e., a win-win transformation), based largely on these three major actions. A clear accountability framework will help empower the change actions required to achieve a win-win transforma- tion of healthcare systems, increasing responsibility at all levels. Accountability can span the system with govern- ments providing adequate healthcare financing and rational policy, healthcare professionals ensuring clinical standards and delivering quality care, payers incentiv- izing preventive and proactive chronic care, and citizens taking responsibility for their own health. This kind of win-win transformation is rarely easy, but with action and accountability come new opportunities and the potential for a sustainable healthcare system that supports all of its stakeholders. As Don E. Detmer, President and CEO of American Medical Informatics Association, says, “A good healthcare system is both a social and an economic good. That is, effective health- care results in a society with healthier, happier people, who at the same time contribute to the culture’s produc- tivity and economic growth. In short, it makes both good dollars and good sense to assure that all citizens have access to genuinely effective healthcare services, and the earlier the better.” 44 Win-Win Transformation Tra nsforming Transforming Transform ing Value ConsumerResponsi bility CareDeliv ery Source: IBM Institute for Business Value.
  24. 24. 17Healthcare 2015: Win-win or lose-lose? Category Funding Consumers Government Healthcare system Will enough be available? Will it be prioritized and spent well? What is the overall health status? What are societal expectations? What is the willingness to change behaviors? What are social norms on privacy, new technologies, etc? How many “literate health activists”? Does the government have the leadership, political will, and stability to drive significant change? Do government policies and regulations enable transformation? Are key stakeholders (e.g., payers, doctors and hospitals) willing to change to address the challenges? Is the healthcare infrastructure (e.g. facilities and IT) appropriately robust? • Public/private spending percentage • Growth rate • Percentage of GDP compared to competing countries • Per capita spending compared to competing countries • Percentage of administrative costs • Estimated potential savings • Breakdown of current spending (public health, end-of-life diseases, etc.) • Healthy life expectancy at birth (HALE) • Disability-adjusted life years (DALYs) and quality-adjusted life years (QALYs) • Percentage of obese, overweight and underweight people • Current public spending on end-stage diseases • Willingness to accept less than most state-of-the-art care in the interest more equitable access • Scale from Confucian to individualistic cultures • Individuals responsibility for their health through health behaviors (smoking rates, obesity rates, sexually transmitted diseases, seatbelt use, etc) • Participation of those with chronic conditions in self-management programs • Individual-centric, provider-centric, and government-centric potential norms • Adult health literacy rate • Number of Internet users • Penetration of consumer-driven health plans • Recognition and acknowledgement of the problem of sustainability and the need to make difficult choices • Ability to prioritize and follow through • History of addressing tough challenges • Policies and regulations that promote healthy behaviors • Policies that emphasize/reward healthcare delivery performance • Policy driven by “evidence” and objective analysis rather than entrenched interests or history • Emphasis on accountability in funding arrangements • Government capacity to take long-term view in terms of health spending • Incentives reward a longer-term perspective • Gap between current financial incentives and aligned incentives • Clear accountability framework • History of successful change management • Leadership buy-in • Adequate facilities exist or will exist • Ability to educate to enable continuous improvement • Ability to share information TABLE 1. Assessing a country’s willingness and ability to transform. Questions Sample metrics
  25. 25. 18 IBM Global Business Services 3. Transforming value Introduction To successfully achieve a win-win transformation, consumers, payers, and society must base their health- care decisions on a shared definition of value. This increased focus on value drives more efficient, effective healthcare delivery. Further, by 2015, the concept of healthcare value, in both its definition and scope, will itself be significantly more expansive. In this section, we explore value specifically from the perspective of the key purchasers of healthcare – consumers, payers, and society. Then, because the definition and primary drivers of value also depend on the evolutionary position of a country and its healthcare system, we offer a healthcare hierarchy of needs to describe what type of services might apply at different points in a country’s development. Finally, we explore how value needs and perceptions differ among stake- holders depending on their country’s position on the healthcare hierarchy. The eye of the purchaser Good value can be defined as an optimal point on a cost and quality curve. Both cost and quality include a product component (e.g., the clinical outcomes from a regimen of medical treatments) and a service component (e.g., the delivery of the treatments). In healthcare, value further includes access and choice components. Defining and measuring value in treating Alzheimer’s disease In 2006, the United Kingdom’s National Institute for Health and Clinical Excellence (NICE) recommended doctors continue prescribing drug treatments for Alzheimer’s disease patients with moderate forms of the disease but cease prescriptions to patients with mild or severe forms. Based in part on a cost-effectiveness assessment, this ruling leaves hundreds of thousands of patients in England and Wales without licensed drug treatment for this degenerative disease. 45,46 The ruling illustrates key questions about value. For instance, if a treatment helps people, should it be paid for and who should pay? Should governments and private insurers automatically pay or should they first measure benefits against costs? And, what cost-benefit ratio will trigger treatment? Further, there are broader ramifications that must be considered as each country determines value in its journey to a win-win transformation. If drugs or procedures with high costs and little benefit are routinely denied, what are the conse- quences on innovation and the ability to attract world-class workers and companies? Healthcare systems and their stake- holders will have to balance the dual and often conflicting goals of quality improvement and cost control. Currently, determining value in healthcare is a difficult task. We do have some information regarding cost, but it is neither comprehensive nor widely available. Quality data is scarcer still. In fact, some argue that healthcare quality cannot be defined, let alone measured – an argu- ment that is unintentionally supported by the difficulty in obtaining the codified clinical data needed to achieve these tasks. Consequently, in today’s healthcare environ- ment, value decisions are based primarily on cost and supported by anecdotal and in other ways unreliable quality information.
  26. 26. 19Healthcare 2015: Win-win or lose-lose? By 2015 and in the win-win scenario, the ability of stake- holders to measure healthcare cost and quality and determine value will be dramatically transformed. Aided by the widespread application of information technology to healthcare delivery, access to the standardized clinical data needed to define good quality care and measure provider and patient performance will be vastly improved. The increasing use of electronic health records (EHRs) will expand the perception of value to encompass addi- tional components, including individual care preferences, unique medical circumstances, and care delivery options. At the same time, value perceptions will shift in response to the drivers mentioned previously, particularly the aging of populations, increased prevalence of chronic disease, and new medical technologies. Of course, value remains in the eye of the beholder and the concept of “good value” differs depending on where one falls in the healthcare purchasing chain. A 55-year- old consumer who wants to keep playing basketball might consider an advanced hip replacement costing US$50,000 a good value. Society and payers may not agree. As the purchasers and benefactors of healthcare, consumers, payers, and society all have different opin- ions as to what is good value. Balancing and resolving these conflicts are major challenges in the transformation of healthcare systems. Perspectives on cost – Cost in healthcare, for the purposes of this discussion, is the monetary amount that is paid for a healthcare treatment and its associ- ated service, such as a medical procedure, consultation, hospital visit, or medication. Consumers, payers, and society view costs very differently. • Consumers – Today, consumers often have little direct responsibility for bearing the costs of healthcare. In most parts of the world, consumers pay for a majority of their healthcare indirectly through taxes, insurance premium contributions, and nominal co-payments and deductibles. As a result, consumers have little idea of treatment costs and very limited access to cost infor- mation. By 2015, consumers in transformed healthcare systems will directly pay for a larger portion of healthcare costs and assume greater financial oversight and responsibility, which, in turn, will drive increased cost transparency and comprehensibility. • Payers (public or private health plans, employers and governments) – Today, payers shoulder the burden of healthcare costs. They see costs as episodic in nature and work to control them by limiting the amount of services available or reducing the amount reimbursed for a specific procedure or medi- cation. By 2015, as their focus on value is transformed, payers will take a more holistic view of cost – looking not simply at the episodic costs of procedures but also at how investments in prevention, alternative treatments, and proactive health status management can optimize the balance between short-term and long-term costs of care. • Society – The relationship of society as a whole to cost is difficult to define. While societal perceptions tend to reflect the thinking of the individuals that make up a society, conflicts often arise between what people believe in the abstract sense and how they respond when they are directly affected. Generally speaking, society today tends to see healthcare costs in the aggregate, using metrics such as percentage of Gross Domestic Product (GDP) or per capita spending. While these are interesting statistics, they say little about the value of the healthcare being purchased nor do they provide useful tools for managing cost. By 2015, to control costs and prevent healthcare from hitting the wall, societal perspectives on what is “worth it” (e.g., the best use of limited funds) will be factored into the value equation.
  27. 27. 20 IBM Global Business Services Tangible and intangible measures of quality – Quality in healthcare is a multifaceted characteristic. It includes tangible measures, such as whether and how quickly a patient is able to resume normal activity after a proce- dure and how quickly a needed appointment to see a specialist can be obtained. It also includes intangible measures, such as the bedside manner of a provider and the friendliness and attentiveness of the support staff. The determination of healthcare quality is further compli- cated by the impact of patient behaviors on treatment outcomes. As with cost, quality resonates differently with consumers, payers, and society. • Consumers – Today, the consumer’s ability to predict quality in healthcare is equivalent to a roll of the dice. For the most part, consumers must base their decisions on the recommendations of others, anecdotal information on the outcomes of previous patients, service measures (e.g., wait times), and their personal impressions of the doctor’s bedside manner. Quite understandably, the consumer’s perception of quality is also egocentric and highly subjective. By 2015, data that definitively measures the clinical quality of providers and facilities will be available in same degree that consumer product information is available today. This data will be obtained through the ubiquitous use of health information technology and it will be more readily accessible, reliable, and under- standable. There will be less inclination for people to accept on faith that although there may be “bad doctors,” their doctor surely must be one of the good ones. • Payers – Today, governments and private payers do not know much more about healthcare quality than consumers. Their financing mechanisms rarely take quality into account and most payers, whether private or public, are focused on keeping interventions and the rates that determine payment in an affordable and acceptable range. This is already changing and by 2015, payers will have modified their reimbursement mechanisms to reflect the reality that prevention and doing the right thing well once are more cost effective in the long run. Pay- for-performance programs, such as those already appearing in the United States, Singapore, and the United Kingdom, will differentiate reimbursement based on pre-established quality metrics. • Society – Today, society pays little attention to health- care quality. The prevailing attitudes are “anything goes” and “if it’s broken, fix it.” These attitudes are unsustainable, of course. Today Consumers Society Payers Provider incentives Demand • Fix me regardless of cost or cause • Healthcare is a societal right • Minimize unit costs • Financial incentives to treat and to do more, not prevent • Help keep me well • Provide appropriate, cost-effective, high quality care when needed • Healthcare is a societal right - but available funds must be prioritized well across the hierarchy of needs • Transparent cost/quality information • Able to accept value-based reimbursement • Wellness and prevention • High quality, cost-effective acute and chronic care TABLE 2. Transforming value perceptions. Future Supply
  28. 28. 21Healthcare 2015: Win-win or lose-lose? By 2015, societies will demand that payment for health- care services be aligned to the value those services return to the society as a whole. Societal healthcare decisions will be based on the ability to measure quality – of services provided and the corresponding effect on the recipients and their ability to contribute back to society. Hierarchy of healthcare needs model In 1943, Abraham Maslow introduced his Hierarchy of Human Needs to explain the psychology of motivation. In Maslow’s hierarchy, our most elemental physiological needs, such as food, air, and water, form the base of a five-tiered pyramid. As our physiological needs are satis- fied, the next level of needs – safety needs – emerge and motivate us, until we reach the peak of the pyramid, which represents actualization or spiritual needs. 47 The aggre- gated motivations and value perceptions of stakeholders in healthcare systems can also be thought of as being governed by a hierarchy of needs. In this case, they are: • Environmental health needs – Rudimentary health- care needs, such as clean water, adequate food and nutrition, clean air, and adequate sanitation, form the base of the pyramid. • Basic healthcare needs – The next level up includes basic medical care, such as immunizations and preventive screenings, which eradicate substantially premature death. • Medically necessary needs – The third level includes the medical treatment of acute, episodic illness, injury, and chronic disease. Conceptually, this level includes affordable treatments (as determined by societal opportunity costs) that enable patients to perform the activities of daily living. • Health enhancements – The fourth level encom- passes treatments that are not strictly medically necessary, but improve overall health and the quality of life, such as lifestyle drugs, cosmetic surgery, and corrective surgeries that address problems that are not seriously health-threatening (e.g., arthroscopic surgery to improve mobility or strength of a joint so an individual can resume levels of activity beyond the normal activi- ties of daily living). • Optimal health – The peak of the pyramid encom- passes a higher and more holistic understanding of health in which individuals attain optimal physical and mental health, a state beyond the mere absence of symptoms or disease. Treatments at this level include genetic testing and personalized wellness plans. Generally speaking, there is a natural precedence in the healthcare needs hierarchy, with the lower levels taking priority over the higher levels for both individuals and societies. It is clear that in healthcare systems in which a significant portion of the population cannot obtain basic immunizations, public resources would not and should not be assigned to providing access to elective cosmetic surgery. But, after the bottom three levels are adequately satisfied, we would expect to see the value demands shifting upwards to health enhancements and optimal health. FIGURE 5. Hierarchy of healthcare needs model. Source: IBM Institute for Business Value analysis. Optimal health (e.g., holistic and personalized health and wellness) Health enhancements (e.g., cosmetic and LASIK surgeries) Medically necessary needs (e.g., acute care for sickness or injury) Basic healthcare needs (e.g., immunizations and preventive screenings) Environmental health needs (e.g., clean water, adequate sanitation, and clean air) Socialrights Funding gap Marketservice InfiniteneedsFiniteneeds
  29. 29. 22 IBM Global Business Services Interestingly, as a system moves up the pyramid, the demand for resources increases. The bottom two levels, for instance, represent relatively finite needs. In simple terms, only one smallpox immunization per child is required. At the third level, however, the resources required to satisfy healthcare needs begin to expand. The treatment of an episodic illness may require finite resources, but diabetes creates an ongoing demand for resources. As a system moves up the hierarchy, the aggregate demand for resources continues to grow. Examples include the treatment of end-stage diseases (e.g., certain types of cancer and heart disease), the maintenance of patients on life support, and serial cosmetic surgery. Each healthcare system copes with this demand for resources by drawing a line between needs and wants that are considered societal rights and those that are generally considered market services. In any given system, if you compare the position of the societal rights/ market services line to the position of the finite/infinite needs line, you can obtain a sense of the magnitude of the funding gap the system faces (Figure 5). Value needs vary with hierarchy level If we consider the world’s countries in relation to the hierarchy of healthcare needs, we can see that needs of individual countries tend to vary by their position on the hierarchy. In general terms, in the least developed countries, the basic needs are encompassed within lowest two levels in the hierarchy are the highest priority. Developing countries are grappling with the provision of needs in the lower and mid levels of the pyramid. And developed countries struggle with the greater resource demands in the mid and upper levels (Figure 6). Least developed countries – To date, the least devel- oped countries have been largely bypassed by the effects of the drivers of healthcare change, particularly globalization. 22 Survival is the issue in these countries and in order to survive, they must create and maintain healthy populations. A sound physical infrastructure enabling healthy lives is essential to this goal. Countries cannot progress up the economic ladder if their citizens are in poor health and must devote large portions of their time to acquiring basic needs, such as clean water and food. So, the least developed countries generally have a strong need to address environmental health issues. Disturbingly, the least developed countries are also begin- ning to experience the rise of chronic illnesses arising from previously fatal infectious diseases and lifestyle choices, such as smoking, while remaining in the least capable position to manage them. For instance, the WHO reports that chronic disease will be a leading cause of death in Nigeria by 2015 (Figure 3, page 9). 25 The ability to provide the healthcare needs in the least devel- oped countries is also affected by high birth rates. These countries will continue to experience higher population expansion than developed or developing countries. Developing countries – In developing countries, the drivers of healthcare change are creating a mixed outlook. For those that have managed find a place within the global economy, their economies and populations are moving up the value chain, a shift accompanied by higher expectations of their healthcare systems. The incursion of technology is leading to increased produc- tivity, but difficult tradeoffs are surfacing. There is a tremendous demand for continued spending on afford- able education and the physical infrastructure, such as water, sanitation, energy, and transportation. At the same time, the need to maintain a healthy workforce is critical and the demands of the population for additional health- care services are growing. The prevalence of chronic disease, which is not only expensive to treat but also negatively impacts national productivity, is a major factor in developing countries. By 2020, the WHO estimates that two-thirds of all deaths in India will be caused by chronic disease. The loss of income to China over the next ten years as a result of heart disease, stroke, and diabetes is estimated at
  30. 30. 23Healthcare 2015: Win-win or lose-lose? US$550 billion.25 At the same time, developing countries are still fighting infectious diseases – not only existing ones, but also new diseases and new strains of disease, such as multidrug resistant tuberculosis. Developed countries – In developed countries, the drivers of healthcare are having a substantial impact. Globalization, for instance, has resulted in expanded markets for the goods and services of those countries, but has also created greater competition and related cost/price/quality pressures. As economies expand and populations become more educated, healthcare needs also expand. In fact, public expenditure for health in all OECD countries has increased nearly 2.0 times more rapidly than economic growth. 48 On average, life expectancy across OECD countries reached 78.3 years in 2004, up from 68.5 in 1960. 49 The longer life spans in developed countries are accompa- nied by the increased incidence of chronic diseases, such as diabetes, depression, stress-related illnesses, congestive heart failure, coronary artery disease, and asthma. As we have seen, obesity is also a major trend in developed countries as well as an additional risk factor in many chronic diseases. More than 50 percent of adults are now defined as being overweight in ten of the 30 member countries in the OECD. 49 Value perceptions vary with the hierarchy level In any given country’s healthcare system, the value perceptions of consumers, payers, and society will also vary with its position on the healthcare needs hierarchy. Further, as a country rises up the hierarchy in its ability to meet more sophisticated healthcare needs, the number and intensity of value conflicts between consumers, payers, and society tend to increase. When the focus of a government is on the provision of clean water, sanitation, clean air and other environmental needs, there tends to be little conflict between value perceptions (Table 3). Individual consumers, payers (in this case, the government), and society as a whole can all agree that everyone benefits from these necessities. The same is true for basic healthcare needs. The perception that immunizations and preventive screenings create good value is near universal. In fact, vaccines were credited with preventing two million child deaths in 2003 alone. 50 Differences in value perceptions tend to begin in earnest once a society has substantively addressed environ- mental and basic healthcare needs. At the level of FIGURE 6. Relative value needs in developed, developing and least developed countries. Developed countriesDeveloping countriesLeast developed countries Source: IBM Institute for Business Value analysis. Optimal health Health enhancements Medically necessary needs Basic healthcare needs Environmental health needs
  31. 31. 24 IBM Global Business Services Differences in value perceptions tend to begin in earnest once a society has substantively addressed environmental and basic healthcare needs. At the level of medically necessary needs, consumers often think that treatment for any health issue they are experiencing, even those self-inflicted through poor living choices, is both medi- cally necessary and a good value. Payers tend to take a narrower view and make decisions based on how much care can be provided given the available funding. Society will tend to side with the wishes of the individual consumer until granting those wishes negatively impacts other services it holds dear, such as retirement benefits, law enforcement, or public education. The biggest challenge will be in determining what is a medical necessity versus an enhancement and what should be a societal right versus a market service. Surprisingly, value conflicts begin to clear at the optimal health level of the hierarchy. Wellness, prevention, and personal responsibility tend to require relatively low cost investments and generate high quality outcomes. Consumers value the services available at this level as they come to understand the relationship between lifestyle decisions and their health status. Payers with a long-term view, especially governments and employers, find that well- ness and prevention programs create improved financial returns and increased productivity. Society, mirroring the attitudes of consumers, places greater value on smoke- free environments, active lifestyles, and healthy foods. As in the first two levels of the hierarchy, the perceptions of value once again begin to merge. Consumers TABLE 3. Perception of value by hierarchy of healthcare needs level and stakeholders. Payers Society • Availability of personalized medicine • Cost/benefit of sophisticated medical technology • Life expectancy at birth • More comprehensive population based screening • Life expectancy at birth • Disability adjusted life years • Equity – all potential users should have access regardless of their means • Population wide screening • Immunization rates • Minimizing prematurely lost life years • Death from infectious disease or malnutrition • Infant mortality • Life expectancy at birth • Minimizing public pay for optimal health services • Minimizing unacceptable opportunity costs for public pay care • Costs and volumes of tests and medical procedures • Lifetime costs of healthcare • Reasonable burden/competitiveness of healthcare costs • Equity – high users should not be an excessive burden on any public system • Minimizing unacceptable opportunity costs in public pay care • Per capita healthcare costs • Return on investment • Minimizing the financial burden arising from infectious disease • Minimizing the financial burden arising from infectious disease • Lifelong quality of life, including predictive and preventive measures and care • Above average functional performance • Access to information and health education • Access to sophisticated medical technology • Opportunity to shape healthcare consumed to meet personal priorities • Wait times for elective procedures • Choice of providers, choice of diagnostic and treatment options • Access to primary care • Right care at right time in right place • Safe care • Integration/coordination of care • Choice in care decisions (e.g., end of life care) • Eradication from major infectious diseases • Ability to access medical care • Survival of children • Potable water • Clean air • Basic sanitation Optimal health Health enhancement Medically necessary needs Basic healthcare needs Environmental health needs